presented by state of the services economy · 2019. 5. 2. · are feeling the effects of...

2019

Stateof theServicesEconomy

PRESENTED BY

311 Respondents

Regions: US, UK, Australia

Industries: IT Services, Consulting, Marketing/Advertising Services

Titles/Roles: Director, CIO, CTO, CEO, President, VP, CFO, COO, CMO

Company Size Range: 50-9,999

About This Report

The services industry has experienced unprecedented levels of growth during the last several years and shows no signs of slowing down. The market is growing and services organizations are changing, adopting new technology and targeting a wider range of clients than ever before.

This level of incredible opportunity and its accompanying challenges have surfaced in our third annual State of the Services Economy report.

This year, our research surveyed organizations from around the world and found that industry growth and the related challenges are being felt by services companies everywhere. This is evidenced by the six industry trends detailed within this report.

Foreword

2019 State of the Service Economy | 2


Client expectations have steadily risen over the last decade, creating a cycle of disruption that has fundamentally changed how companies operate and what it takes to succeed.

Growth means that the services industry is also more crowded, offering buyers more options for services. In order to compete and respond to constantly rising client expectations, services organizations are turning to distributed workforces and optimizing technology solutions like never before.

However, businesses, regardless of size and industry segment, are experiencing common internal complications that hamper the ability to collaborate and fully leverage their technology investments. Supported by distributed and contract workers, businesses are providing a broader range of services, which is pushing them into new markets and increasing competition.

Competing and growing in an increasingly complicated services industry can be confusing and challenging for a business, no matter their size and experience. Success depends on making informed decisions focused on solving current challenges while planning for long-term growth.

We hope that our in-depth insights into the State of the Services Economy will serve you well in making impactful business decisions and strategic improvements regarding the future of your organization. The companies that differentiate service offerings and consistently exceed client expectations will not only stand out today, but will become tomorrow’s industry leaders.

1. Growth is the greatest priority and challenge » 4

2. The race to compete is fraught with challenges » 8

3. Client expectations show no sign of easing » 12

4. Major operational challenges thwarting growth » 16

5. The distributed workforce is key to client retention » 21

6. Abundance of technology complicating business » 25

How much does one hour cost you? » 29

Conclusion » 30

Trends

01

Growth is the Greatest

Priority and Challenge


of businesses are experiencing growthThe services industry is experiencing growth, with a total of 64% of respondents stating their businesses are growing. The question is, how do companies take advantage of this sustained industry-wide growth?

%


64

This is the year companies take advantage of major opportunities and refine business processes that have become increasingly complex.

Those that succeed will continue to accelerate revenue, decrease the complications impacting margins, and reshape the services industry landscape in the years to come.

Continued growth demands that businesses tackle several pressing challenges. Winning new clients, improving profitability, gaining a larger share of client business, and expansion into new markets are the top business priorities in 2019, illustrating how services businesses are not simply waiting for new customers to find them. In turn, this pursuit of new opportunities fuels greater competition and emphasizes the importance of better workforce utilization and more effective systems management.

Top business priorities in 2019

say it is harder to operate a services business

MarketResearch estimates annual services industry

growth of 5.4% through 2020, leading to an even larger

industry. In addition, 46% of respondents to our

survey state that it has become harder to operate a

services business over the last 12 months.

46%

Win New Clients

Improve Profitability of Work

Growth Among Existing Clients

Expansion into New Markets


https://www.marketresearch.com/Business-Research-Company-v4006/Professional-Services-Global-General-Legal-10936615/?progid=89841

Top business challenges in 2019

More services organizations, regardless of size, are taking advantage of contract workers and exciting new technologies to provide a broader range of services and deliver projects faster with healthier margins.

Doing so can attract a larger portion of a client’s potential business that would otherwise go to competitors.

While the services industry as a whole continues to grow, attaining consistent growth remains a challenge for many companies. When reflecting on 2018, companies stated that increasing revenue, data management, and improving margins were the top three business challenges they faced. When looking at 2019, increasing revenue, improving margins, and hiring/retaining employees were the top three business challenges cited by the market.

40%Increasing Revenue

34%Improving

Margins

29%Hiring and Retaining

Employees

Growth and opportunity clearly continue to be on the minds of services providers today.


The Race to Compete is

Fraught with Challenges

02


of businesses experienced increased competition in the last 12 months

In the midst of industry growth, companies are expanding to provide new services to entice clients that would typically be served by other services providers, often from other industries. This has exposed them to a new set of competitors.

70%


Companies that traditionally stuck to consulting, IT services, or digital agency work are providing services found in other sectors in an effort to better retain clients and gain a greater share of their clients’ business.

It comes as little surprise that organizations chose increased competition as one of the top business pressures in 2019. When compared to the previous year, we can see that more and more businesses are feeling the effects of competition, with a year-over-year increase from 33% to 45% identifying increased competition as a top business pressure.

Fueled by increasing access to skills and talent by the rise of the distributed workforce, the sectors of the services industry are beginning to blur.

IncreasedCompetition

Top businesspressure in 2019


Gartner reports that 89% of businesses soon expect to compete mainly on customer experience, meaning that success will depend on personalized, high quality services. The coming year stands to be a major time of change and growth for companies, both in how they expand within their respective markets and how they change internal business processes and structure to succeed.

Services organizations that offer new types of work or acquire other companies are also forced to compete with more businesses.

89%

This increase in competition propels businesses to continue expanding their services, perpetuating the cycle of new markets and new competition.

expect to compete mainly on customer experience


https://blogs.gartner.com/jake-sorofman/gartner-surveys-confirm-customer-experience-new-battlefield/

Client Expectations

Show No Sign of Easing

03


say client expectations are increasingAs has been seen in the past several years, meeting ever-increasing client expectations is a major force behind the evolution within services organizations. Client expectations regarding the quality of work they receive from a services organization continue to rise, with an eyebrow-raising total of 85% of surveyed services organizations saying that client expectations are increasing.

85%


When it comes to the top business pressure of 2019, services organizations indicated managing changing customer expectations as one of the top three pressures, underlining its continued importance in long-term business strategy.

Top business pressure ın 2019

Managing Increasing Customer Expectations


1. Speed of delivery

2. Quality of work

3. Cost of work

Where are client expectations increasing?

Meanwhile, buyers are discovering and consuming hyperspecialized services and support from sources around the world. Gaining client trust and exceeding quality expectations can drive long-term success.

As a result, companies of all sizes must ensure they are meeting or exceeding expectations to earn continued business, as well as expand services offering to take on additional projects for any given client.

Client expectations have increased the most in the last 12 months in the areas of speed of delivery, quality of work, and cost of work. These are the same aspects in which client expectations rose in last year’s report and indicate that there is no slowing down, leading to a self-perpetuating cycle of rising expectations and improving the client service experience.

Today, companies in the Services Economy are better supporting client needs while optimizing processes to operate with more agility and improve margins.

Clients are increasingly likely to contract services providers on a project-by-project basis, seeking help from those with the most relevant expertise for a given need.


04


Major Operational Challenges

Thwarting Growth

of projects are not completed on time

of projects go over budget

Operational challenges that arise from a variety of sources stand between services organizations and the growth needed to thrive in the industry today. Despite the increasing use of internal solutions and a distributed workforce, roughly a third of all projects fail, going over on budget and/or timeline.

31%

30%


Businesses may be growing and changing in the services industry, but there is still plenty of room left for improvement. While 64% of respondents indicate that revenue is trending up and 56% indicate that billable utilization is improving, two-thirds of organizations believe their utilization rates can still be improved.

say utilization rates can be improved

66%

of companies have turned down work due to lack of resources

Businesses are facing new challenges in being able to manage the distributed workforce, with companies stating that remote teams were one of their top three collaboration challenges in 2019. According to our 2019 research, 50% of surveyed companies have had to turn down work in the last 12 months due to inadequate resources, with a majority saying this was due to not having the right number of resources.

50%



While 99% of respondents stated that collaboration is important or critical in getting work done, the number of companies that rate the ability to collaborate as excellent dropped from 61% to 48% year over year.

Each aspect of running a services business has unique obstacles. By improving each, companies can succeed in the ways most needed.

Resource management tools have become more important than ever to prevent and overcome today’s most pressing challenges in the industry. While managing unplanned changes is the most significant resource management challenge today, forecasting and visibility also present major obstacles in unlocking the true potential of resources.

Managing client expectations, getting the right skills on the right projects, and pricing projects accurately are the three most significant project management challenges today.

Top project management challenges

Managing customer expectations

Getting the right skills on the right projects

Pricing projects accurately

Top resource management challenges

Manage unplanned project changes

Forecast staffing needs

See resources across multiple projects

Our organization's ability to collaborate

is excellent:

2018

48%

201961%


It’s clear that strong collaboration is incredibly important for services businesses, despite success being difficult to achieve.

When citing the top collaboration challenges today, information spread across too many systems, too many meetings, and accessibility of information were at the top of the list.

The intersection of technology and blended workforces derived from distributed and contract workers has created more complex behind-the-scenes processes.

Top collaboration challenges

Aligning the new workforce and new tools with a new strategy can accelerate company growth and strengthen services offerings.

Information spread across too many systems

Too many meetings

Accessibility of information


05


The Distributed

Workforce is Key to Client

Retention

55% increase

This interplay between client demands and service variety is driving the distributed workforce’s prominence in the services industry. There is an industry-wide increase in distributed work, with 80% of respondents stating they support remote employees and the majority expecting an increase of remote working within their teams.

The demand for a wider array of services from businesses requires companies find the right talent regardless of location.

Use of distributed workers in the next 12 months 38%

stay the same

7% decrease


Beyond full-time distributed employees, utilizing contract workers effectively through modern technological innovation also plays a major role in helping businesses to scale workforces for improved margins. But despite the need for improved control over collaboration efforts, less than half of the market is working within a project management tool, leaving better resource management and efficient communication untapped.

With competition from a variety of sources consistently increasing throughout the services industry, organizations are looking for a way to gain an edge against other businesses. In today’s market, contractors could make all the difference, with 61% of respondents viewing them as a competitive advantage.

In addition, more workers around the world are beginning to demand remote work. Research from CIPHR found that 76% of US workers prefer to do important tasks in places other than the office, while 70% of UK workers find remote work offerings important.

Beyond remote, full-time employees, contract workers are playing an increasingly important role in services organizations around the world. Businesses of all sizes are using contractors, with 74% of respondents ranking the contractor network as very important to critical. However, 44% find it hard to find the right talent, illustrating the challenges of contract work.

66%

The use of contractors is a competitive advantage for

of businesses

74%A network of contractors is

very important to critical for

of businesses


https://www.digitalhrtech.com/hr-and-the-distributed-workforce/

Being able to manage distributed and contract workers well will support long-term growth and success for services businesses.

A robust 68% of millennial job seekers said an option to work remotely would greatly increase their interest in specific employers, according to a survey by AfterCollege. Younger talent and the ability to transcend location are two of the top reasons cited by businesses in regards to remote work policies.

Despite more businesses than ever leveraging the distributed workforce, the ability to effectively manage that workforce still lags behind. Two-thirds (64%) of US-based hiring managers surveyed by Upwork in 2018 said they have the resources to hire remote workers – but more than half (57%) say they don’t have policies in place to support remote working, preventing more effective utilization.

Distributed work plays a vital role in attracting a new generation of talent.

Acquire talent regardless of geo-location

Avoid employee

commuting time

Retain Millennial/

Gen Z talent


Top reasons for remote work policies

https://remote.co/10-stats-about-remote-work/

https://www.upwork.com/press/2018/02/28/future-workforce-report-2018/

06

The Abundance of

Technology Complicatıng

Business2019 State of the Service Economy | 25

Manual work to compileThese challenges ripple through many

companies, with manual work, visibility, and data accuracy ranking as the top three technology infrastructure challenges currently faced by services providers.

While new applications continue to bring innovative capabilities to workforces, manual work is often needed to use and connect them when they are not properly integrated stifles true potential and creates a lack of clarity.

Lack of visibility between systems

Concerns about data accuracy

Biggest challenges with

current technology infrastructure


The rush to technology adoption without a well-planned strategy and a lack of integration has hindered the effectiveness of systems.Business Intelligence (BI) continues to play a critical role in making the most of systems and the vast amounts of data they produce, but companies are running into a variety of issues, with 72% of respondents citing data quality as a top BI challenge. The result is that the majority of companies are working with unreliable data.

Data quality

Forecasting

Lack of skilled report builders/analysts

Top BI challenges


Time lost in navigation is also hamstringing businesses, with 73% of companies stating they spend more than 1 hour per day on average navigating from app to app. The influx of applications designed to improve efficiency can have the opposite effect when poorly implemented and integrated.

Years of technology adoption have led many to having too many disconnected systems and a difficulty in accessing information.

Integrating solutions and consolidating the vast amount of data coming from each critical application can help businesses greatly improve their efficiency.

How much time per day is spent

navigating from app to app?

44% 1 to 2 hours

24% 2 to 3 hours

5% 3+ hours


How Much Does One Lost Hour Cost You?

Today’s solution environment requires a platform that will drive workforce coordination and process consistency through better integration. By utilizing technology more effectively, companies can respond to elevated client expectations faster and improve their margins.

These areas for improvement illustrate the growing need for Professional Services Automation (PSA) solutions to eliminate time-consuming manual work that slows down processes. However, only 30% of the industry has

implemented a PSA solution, highlighting an area that businesses of all sizes can quickly capitalize on for greater efficiency and improved workforce utilization.

These challenges are the most crucial areas for companies to overcome in 2019. Success means sustained growth, the ability to more effectively compete in the market, consistently satisfied clients, and a more effective, distributed workforce.

Calculation based on a 21-day work month

Billable Resources on Your Team

Per Hour Billable Rate

Lost in Potential Revenue Per Day

100 $150 $15K

X

=


$315,000 Lost Per Month

Supported by advanced solutions being adopted today, services organizations are ready to make the most of the opportunities right in front of them and reshape themselves for years of success.

The future state of the services industry is being shaped by the growth and change happening today. As companies broaden their array of services and begin utilizing the distributed workforce more than ever, the way that services are provided will be reshaped and strengthened for a more efficient, more profitable form of business.

ConclusionAre you ready for the future of the services industry? It begins today.

FIND OUT how Mavenlink can help you grow and thrive in 2019.

https://www.mavenlink.com/resources/service-level-economy





presented by state of the services economy · 2019. 5. 2. · are feeling the effects of...

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